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October 05, 2011

Summary of the Testimony of M. Elizabeth Wall - Center for Professional Responsibility

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Summary of the Testimony of M. Elizabeth Wall
Before the Multidisciplinary Practice Commission

M. Elizabeth Wall, Group Director of Legal and Regulatory Affairs at Cable & Wireless PLC, was the next commentator. Cable & Wireless, a US$12 billion per annum revenue telecommunications company operating in 50 countries around the world, employs lawyers to handle a range of services from internal corporate law to bidding for international telecommunications licenses in such exotic places as Latvia and Panama. It employed 65 lawyers in-house and spent $18 million on outside counsel in FY 1997-98. She explained that the company adheres to strict confidentiality and conflicts standards. Typically speaking, British and continental European PLCs buy tax-related advice and services, not from law firms, but rather from accountancy firms. Because the company now has a U.S. Director of Tax it uses more law firms for the provision of tax advice. Multidisciplinary practices have been a fact-of-life in continental Europe since the early 1990s. Although Cable & Wireless does not use consulting firms to provide legal advice they do, in certain continental European countries, use the accountancy multidisciplinary practice law services to provide company secretarial, as opposed to legal, services as they do that well, practically and on a value for money basis. She thinks there is a market for consulting firm legal advice (on the basis this is done in continental Europe) in those instances of corporations with a less sophisticated or no law function. Each corporation is required to balance cost-effectiveness: the advantage of geographic reach against the disadvantages of lack of strong conflict regulation, lack of confidentiality safeguards and the issue of preservation of legal privilege. She stated that in the UK corporate world there are instances, particularly in large companies, where the Chief Financial Officer is more important than the Chief Counsel. Consequentially, there is a greater opportunity than there might otherwise be for financial/consulting service providers to gain access to major corporate projects, bypassing the involvement of the in-house corporate law function.

The real problem with MDPs is the blurring of issues and its consequent redefinition in some cases of the practice of law. Ms. Wall believes there is a quality issue, a lack of the best quality legal minds being attracted to the accounting firms. Nonetheless, she thinks multidisciplinary practices are here to stay. The larger, more sophisticated companies have corporate counsel whose issue is choice; they frown upon the more opaque ways of proceeding and want the separation of legal advice in order to work through the issues themselves. She thinks the MDPs have more appeal to the small and medium companies as MDPs offer one-stop, integrated service that saves time and energy. The MDP practice structure may be the savior of the small high street practice as it affords those who are flexible and forward-thinking a marketing opportunity. Finding that whats problematic to large multinational corporations in Europe is the consultancy and not the accountancy MDP, she mentioned that the bundling of product and services by the consultancy team - the earlier-mentioned blurring of what is legal practice - signals a sort of dumbing down of the practice of law. The profession should keep this in mind and seek the high ground. Multidisciplinary practices need to offer transparency in order for the client to see whether there is any legal advice being offered in the product and, if so, who is providing that advice, its source. The message is buyer beware and she offered the following example of the problem. A Cable & Wireless tender (request for proposal), which explicitly stated that legal will be in-sourced, elicited a consultancy firm response that nonetheless included at least two lawyers on the proposal team in derogation of the tender and without notice to the client. This extraneous, unwanted legal component served to breach the engagements non-disclosure agreement signed by the consultancy. Had not a company lawyer been present at the proposal conference the human resources, tax and finance people might not have been aware that a consultancy lawyer was present and the company would have been deprived of getting the legal advice it really needed. The closing words of the corporate counsel were choice - educated choice - and transparency. She also urged on the profession - and the legal market - a higher awareness of what is the practice of law.

In response to a question from Professor Daly, Ms. Wall said the key values of the profession it should protect are independence, confidentiality and conflicts avoidance. She felt the Commission should do a due diligence check to assess whats happening in the U.S. and determine if corporation-consultant operation here is different than in the United Kingdom. She conceded that it has not been determined that the consultancy bundling approach is more efficient as there have not been choices for comparison. Theres a need for consultancy firms to provide transparency to identify what services they provide, from whom, in order to better identify legal fees and other costs. For instance, they propose a particular financial product, a cookie cutter type, and sell it as a solution to a business problem. It may not work because the cookie cutter aspect of it doesnt fit the organization and the corporation, not able to see the inner workings, is not able to recognize the particular assumptions that are not appropriate for its operation. Rather than analyze whats happening the corporation may accept what Ms. Wall calls the Trojan Horse offering (theres legal advice the corporation doesnt know about in there). She asserted that disclosure of attorney involvement should be mandated up-front as there is a need to know if law has been an input into the solution offered. Asked by Mr. Traynor if a one-stop shop service provider with a legal component would be in a position of being able to defend its own error with client consent, Ms. Wall responded that acceptability is a question of what ground rules are established. In response to Mr. Wanders questions she commented that regulatory hurdles for the legal marketplace were lower in Europe than in the U.S. and that theres actually more difficulty with the consultancy practice than with audit/accounting as in most of Europe the tax practice is handled by accountants, not lawyers. Ms. Wall said the corporate quest is for the best legal talent for the problem, the best practitioner, oftentimes from a Blue Chip firm. She commented on the culture and turf issue in saying that the best legal minds dont want to work for accountants (will this be true at the end of the day?), but that accounting firms have great geographical reach, great technology and know how to talk to business because they are business people. Although the Big Five want their regular clients to be their law clients that hasnt happened yet. The high street firm has clients who are not as sophisticated, with different needs, and there may be a need for ground rules for these clients. An in-house lawyers challenge is to get involved in the transaction soon enough so that the best and most efficient legal advice can be used. She offered that the way to get the necessary detail in the billing statement is to include in the tender the client criteria so it becomes part of the engagement, including whats wanted and whats not wanted. In response to Professor Haddons question regarding what ground rules beyond disclosure were suggested, Ms. Wall began by stating that a different standard should be applied in the event law is a part of the service package. If so, the service firm would be held to the highest standard unless it disclosed and clearly identified a lesser standard; it would also disclose what service and what cost, so the client would be put on notice if the client needed to self-protect.